Share Option Agreement Under the XOMA Ltd.
Exhibit
10.4
Under
the XOMA Ltd.
1981
Share Option Plan
|
(A)
|
Optionee:
|
(E)
|
Payroll
Number:
|
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇
|
|||
|
(B)
|
Grant
Date:
|
(F)
|
Expiration
Date:
|
|
August
3, 2007
|
August
3, 2017
|
||
|
(C)
|
Shares:
|
(G)
|
Exercise
Price:
|
|
184,328
|
$2.17
|
||
|
(D)
|
Share
Installments:
|
(H)
|
Option
Type:
|
|
34,561
shares become exercisable beginning August 8, 2007
149,767 shares
become exercisable monthly in accordance with the attached Schedule
A
|
Incentive
Share Option
|
XOMA
Ltd.
(the "Company") has granted you an option to purchase the number of Common
Shares shown in item (C) above (the "Optioned Shares") at the Exercise Price
per
share shown in item (G) above. This option is subject to the terms of the
Company's 1981 Share Option Plan, as amended through December 8, 2004 (the
"Plan") and to the terms and conditions set forth in this Share Option Agreement
under the XOMA Ltd. 1981 Share Option Plan (the "Agreement").
The
details of your option are as follows:
1. Term;
Transfer. The term of this option commences on the Grant
Date shown in item (B) above and, except as provided in Section 3 and Subsection
5(a) hereof, expires at the close of business on the Expiration Date shown
in
item (F) above, which is 10 years from the Grant Date.
If
this
option is a non-qualified option, it may be transferred or assigned to your
spouse or descendent (any such spouse or descendent, your "Immediate Family
Member") or a corporation, partnership, limited liability company or trust
so
long as all of the shareholders, partners, members or beneficiaries thereof,
as
the case may be, are either you or your Immediate Family Member, provided that
(i) there may be no consideration for any such transfer and (ii) subsequent
transfers of the transferred option will be prohibited other than by will or
the
laws of descent and distribution. Following transfer, the option will continue
to be subject to the same terms and conditions as were applicable immediately
prior to transfer, provided that for purposes of this Agreement any references
to "you" will refer to the transferee. The events of termination of employment
will continue to be applied with respect to you, following which the option
will
be exercisable by the transferee only to the extent, and for the periods
specified, in this Agreement.
If
this
option is an incentive share option, the option shall be exercisable during
your
lifetime only by you and shall not be assignable or transferable otherwise
than
by will or by the laws of descent and distribution.
2. Exercise
Schedule. Provided that you remain an employee of or
consultant to the Company (as determined in accordance with Subsection 3(f)
hereof), the option granted herein will become exercisable (a) as to 25% of
such
number of shares (rounded to the nearest whole integer), upon the first
anniversary of this date of grant, and (b) as to the remaining 75% of such
number of shares (rounded to the nearest whole integer) monthly in accordance
with the attached schedule A.
Exercisable
installments may be exercised in whole or in part in increments of 25 or more
shares and, to the extent not exercised, will accumulate and be exercisable
at
any time on or before the Expiration Date or sooner termination of the option
term.
3. Effect
of Termination of Employment.
(a) If
you cease to be an employee of the Company at any time during the option term
for any reason other than as provided in Subsections (b), (c), (d) or (e) below,
then the period for exercising this option will be limited to the three-month
period commencing with the date of such cessation of employee status; provided
that, notwithstanding the foregoing, if you cease to be an employee of the
Company and immediately thereafter become a consultant to the Company at any
time during the option term, then the period for exercising this option will
not
be limited as aforesaid but will be limited to the three-month period commencing
with the date of cessation of consultant status, if during the option term;
and
provided further, that in no event will this option be exercisable at any time
after the Expiration Date. During any such limited period of exercisability,
this option may not be exercised for more than the number of Optioned Shares
(if
any) for which it is exercisable at the date of your cessation of employee
or
consultant status, as the case may be. Upon the expiration of any such limited
period of exercisability or (if earlier) upon the Expiration Date, this option
will terminate and cease to be outstanding.
2
(b) If
you die and cease by reason thereof to be either an employee of or a consultant
to the Company at any time during the option term, then this option will become
fully exercisable on the date of death even if the option was not fully
exercisable prior to death, and will remain exercisable for a twelve-month
period following the date of death; provided, however, that in no event shall
this option be exercisable at any time after the Expiration
Date. Upon the expiration of such twelve-month period or (if earlier)
upon the Expiration Date, this option will terminate and cease to be
outstanding. Upon your death, the option will be exercisable by the
personal representative of your estate or by the person or persons to whom
the
option is transferred pursuant to Section 1 above, provided any such
exercise occurs prior to the earlier of (i) the expiration of the
twelve-month period following the date of your death or (ii) the specified
Expiration Date of the option term.
(c) If
you become permanently disabled and cease by reason thereof to be either an
employee of or a consultant to the Company at any time during the option term,
then you will have a period of twelve months (commencing with the date of such
cessation of employee or consultant status, as the case may be) during which
to
exercise this option; provided, however, that in no event shall this option
be
exercisable at any time after the Expiration Date. During such limited period
of
exercisability, this option may not be exercised for more than the number of
Optioned Shares (if any) for which this option is exercisable at the date of
your cessation of employee or consultant status, as the case may be. Upon the
expiration of such limited period of exercisability or (if earlier) upon the
Expiration Date, this option will terminate and cease to be outstanding. You
will be deemed to be permanently disabled if you are, by reason of any medically
determinable physical or mental impairment expected to result in death or to
be
of continuous duration of not less than twelve consecutive months or more,
unable to perform your usual duties for the Company or its
subsidiaries.
(d) If
you retire at or after age fifty-five (55) and the sum of your age on the date
of retirement plus years of full-time employment or consultancy with the Company
exceeds seventy (70) ("Retirement") and if by reason thereof you cease to be
either an employee of or consultant to the Company, at any time during the
option term, then this option will become fully exercisable as of the date
of
Retirement (even if the option was not fully exercisable prior to Retirement)
and will remain exercisable for the full option term until the Expiration Date
as if you had continued in employment or consultancy. On the
Expiration Date, the option will terminate and cease to be
outstanding.
(e) Should
(i) your status as either an employee or a consultant be terminated for cause
(including, but not limited to, any act of dishonesty, willful misconduct,
fraud
or embezzlement or any unauthorized disclosure or use of confidential
information or trade secrets), or (ii) you make or attempt to make any
unauthorized use or disclosure of confidential information or trade secrets
of
the Company or its subsidiaries, then in any such event this option will
terminate and cease to be exercisable immediately upon the date of such
termination of employee or consultant status, as the case may be, or such
unauthorized use or disclosure of confidential or secret information or attempt
thereat.
3
(f) For
purposes of this Agreement, you will be deemed to be an employee of the Company
for so long as you remain in the employ of the Company or one or more of its
subsidiaries, and you will be deemed to be a consultant to the Company for
so
long as you are actively rendering consulting services on a periodic basis
to
the Company or one or more of its subsidiaries. A legal entity will be deemed
to
be a subsidiary of the Company if it is a member of an unbroken chain of legal
entities beginning with the Company, provided that each such legal entity in
the
chain (other than the last legal entity) owns, at the time of determination,
shares possessing 50% or more of the total combined voting power of all classes
of shares in one of the other legal entities in such
chain.
4. Adjustment
in Option Shares.
(a) If
any change is made to the Common Shares issuable under the Plan, whether by
reason of any share dividend, share split, combination of shares,
recapitalization or other change affecting the outstanding Common Shares as
a
class without receipt of consideration, then appropriate adjustments will be
made to (i) the total number of Optioned Shares subject to this option and
(ii)
the Exercise Price payable per share, in order to reflect such change and
thereby preclude the dilution or enlargement of benefits under this Agreement.
The adjustments determined by the plan administrator (the "Plan Administrator")
will be final, binding and conclusive.
(b) If
the Company is the surviving or continuing entity in any merger, amalgamation
or
other business combination, then this option, if outstanding under the Plan
immediately after such merger, amalgamation or other business combination,
will
be appropriately adjusted to apply and pertain to the number and class of
securities which the holder of the same number of Common Shares as are subject
to this option immediately prior to such merger, amalgamation or other business
combination would have been entitled to receive in the consummation of such
merger, amalgamation or other business combination, and an appropriate
adjustment will be made to the Exercise Price payable per share, provided the
aggregate Exercise Price payable hereunder will remain the same.
5. Corporate
Transaction.
(a) In
the event of one or more of the following transactions ("Corporate
Transaction"):
(i) a
merger, amalgamation or acquisition in which the Company is not the surviving
or
continuing entity, except for a transaction the principal purpose of which
is to
change the jurisdiction of the Company's organization,
(ii) the
sale, transfer or other disposition of all or substantially all of the assets
of
the Company, or
(iii) any
other reorganization or business combination in which fifty percent (50%) or
more of the Company's outstanding voting shares are transferred to different
holders in a single transaction or a series of related
transactions,
4
then
the
exercisability of this option will automatically be accelerated so that such
option may be exercised simultaneously with consummation of such Corporate
Transaction for the Applicable Percentage (as defined below) of the Optioned
Shares. No such acceleration of this option will occur, however, if and to
the
extent: (x) the terms of the agreement for such Corporate Transaction
provide as a prerequisite to the consummation of such Corporate Transaction
that
outstanding options under the Plan (including this option) are to be assumed
by
the successor or parent thereof or are to be replaced with the comparable
options to purchase shares of capital stock of the successor or parent thereof,
such comparability to be determined by the Plan Administrator, or (y) the
acceleration of this option would, when added to the present value of certain
other payments in the nature of compensation which become due and payable to
you
in connection with the Corporate Transaction, result in the payment to you
of
excess parachute payments under Section 280G(b) of the Internal Revenue Code.
The existence of such excess parachute payments will be determined by the Plan
Administrator in the exercise of its reasonable business judgment and on the
basis of tax counsel provided to the Company. Immediately following consummation
of the Corporate Transaction, this option will, to the extent not previously
exercised or assumed by the successor or its parent, terminate and cease to
be
exercisable.
As
used
herein, “Applicable Percentage” means (i) 33.3% if the Corporate Transaction
Trigger Event (as defined below) occurs on or before September 30, 2007, (ii)
66.7% if the Corporate Transaction Trigger Event occurs on or after
October 1, 2007 and on or before December 31, 2007 and (iii) 100% in the event
the Corporate Transaction Trigger Event occurs on or after January 1, 2008,
and
“Corporate Transaction Trigger Event” means, with respect to a particular
Corporate Transaction, full execution of a “heads-of-terms”-style agreement
reflecting a fully-negotiated set of terms for such Corporate Transaction
intended to lead directly to the drafting and finalization of a definitive
agreement governing such Corporate Transaction.
(b) The
exercisability of this option as an incentive share option under the Federal
tax
laws (if designated as such above) will be subject to the applicable dollar
limitation of Section 16 hereof.
(a) The
Plan Administrator will use its best efforts to provide you with written notice
of a Corporate Transaction at least ten business days prior to the effective
date.
(d) This
Agreement will not in any way affect the right of the Company to adjust,
reclassify, reorganize or otherwise make changes in its capital or business
structure or to merge, amalgamate, consolidate, dissolve, liquidate or sell
or
transfer all or any part of its business or assets.
6. Privilege
of Share Ownership. The holder of this option will not
have any rights of a shareholder with respect to the Optioned Shares until
such
individual has exercised the option, paid the Exercise Price and been issued
a
certificate for the purchased shares.
7. Manner
of Exercising Option.
(a) In
order to exercise this option with respect to all or any part of the Optioned
Shares for which this option is at the time exercisable, you (or in the case
of
exercise after your death, your executor, administrator, heir, legatee or
transferee as the case may be) must take the following actions:
5
(i) Provide
the Secretary of the Company with written notice of such exercise, specifying
the number of Optioned Shares with respect to which the option is being
exercised.
(ii) Pay
the Exercise Price for the purchased Optioned Shares in one or more of the
following alternative forms: (A) full payment in cash or by check
payable to the Company's order; (B) full payment in Common Shares of the Company
valued at fair market value on the exercise date (as such terms are defined
below); (C) full payment in combination of Common Shares of the Company valued
at fair market value on the exercise date and cash or check payable to the
Company's order; (D) payment effected through a broker-dealer sale and
remittance procedure pursuant to which you (I) will provide irrevocable written
instructions to the designated broker-dealer to effect the immediate sale of
the
purchased shares and remit to the Company, out of the sale proceeds, an amount
equal to the aggregate Exercise Price payable for the purchased shares plus
all
applicable Federal and State income and employment taxes required to be withheld
by the Company by reason of such purchase and (II) will provide written
directives to the Company to deliver the certificates for the purchased shares
directly to such broker-dealer; or, to the extent the Plan Administrator
specifically authorizes such method of payment at the time of exercise, (E)
payment by a full-recourse promissory note. Any such promissory note authorized
by the Plan Administrator will be substantially in the form approved by the
Plan
Administrator, will bear interest at the minimum per annum rate necessary to
avoid the imputation of interest income to the Company and compensation income
to you under the Federal tax laws and will become due in full (in one or more
consecutive annual installments measured from the execution date of the note)
not later than the Expiration Date of this option. Payment of the note will
be
secured by the pledge of the purchased shares, and the pledged shares will
be
released only as the note is paid.
(iii) Furnish
to the Company appropriate documentation that the person or persons exercising
the option, if other than you, have the right to exercise this
option.
(b) For
purposes of Subsection 7(a) hereof, the fair market value per Common Share
on
any relevant date will be determined in accordance with Subsections (i) through
(iii) below, and the exercise date will be the date on which you exercise this
option in compliance with the provisions of Subsection 7(a).
(i) If
the Common Shares are not listed or admitted to trading on any stock exchange
on
the date in question, but is traded in the over-the-counter market, the fair
market value will be the closing selling price per share of such shares on
such
date, as such price is reported by the National Association of Securities
Dealers through its Nasdaq National Market. If there is no reported closing
selling price of the shares on the date in question then the closing selling
price on the last preceding date for which such quotation exists will be
determinative of fair market value.
6
(i) If
the Common Shares are listed or admitted to trading on any stock exchange on
the
date in question, the fair market value will be the closing selling price per
share of such shares on such date on the stock exchange determined by the Plan
Administrator to be the primary market for such shares, as such price is
officially quoted on such exchange. If there is no reported closing selling
price of such shares on such exchange on the date in question, the fair market
value will be the closing selling price on the exchange on the last preceding
date for which such quotation exists.
(iii) If
the Common Shares are neither listed nor admitted to trading on any stock
exchange nor traded in the over-the-counter market on the date in question
or if
the Plan Administrator determines that the quotations under Subsections (i)
or
(ii) above do not accurately reflect the fair market value of such shares,
the
fair market value will be determined by the Plan Administrator after taking
into
account such factors as the Plan Administrator may deem appropriate, including
one or more independent professional appraisals.
(b) In
no event may this option be exercised for any fractional share.
8. Compliance
with Laws and Regulations.
(a) The
exercise of this option and the issuance of Optioned Shares upon such exercise
will be subject to compliance by the Company and by you with all applicable
requirements of law relating thereto and with all applicable regulations of
any
stock exchange on which the Company's Common Shares may be listed at the time
of
such exercise and issuance.
(b) In
connection with the exercise of this option, you will execute and deliver to
the
Company such representations in writing as may be requested by the Company
in
order for it to comply with the applicable requirements of Federal and State
securities laws.
9. Restrictive
Legends. If and to the extent any Optioned Shares
acquired under this option are not registered under the Securities Act of 1933,
the certificates for such Optioned Shares will be endorsed with restrictive
legends, including (without limitation) the following:
"The
Shares represented by this certificate have not been registered under the
Securities Act of 1933. The shares have been acquired for investment and may
not
be sold or offered for sale in the absence of (a) an effective registration
statement for the shares under such Act, (b) a 'no action' letter of the
Securities and Exchange Commission with respect to such sale or offer, or (c)
an
opinion of counsel to the Company that registration under such Act is not
required with respect to such sale or offer."
10. Successors
and Assigns. Except to the extent otherwise provided in
Section 1 and Subsection 5(a), the provisions of this Agreement will inure
to
the benefit of, and be binding upon your successors, administrators, heirs,
legal representatives and assigns and the successors and assigns of the
Company.
7
11. Liability
of the Company.
(a) If
the Optioned Shares covered by this Agreement exceed, as of the Grant Date,
the
number of Common Shares which may without shareholder approval be issued under
the Plan, then this option will be void with respect to such excess shares
unless shareholder approval of an amendment sufficiently increasing the number
of Common Shares issuable under the Plan is obtained in accordance with the
provisions of the Plan.
(b) The
inability of the Company to obtain approval from any regulatory body having
authority deemed by the Company to be necessary to the lawful issuance and
sale
of any Common Shares pursuant to this option will relieve the Company of any
liability in respect of the non-issuance or sale of such shares as to which
such
approval will not have been obtained.
12. No
Employment or Consulting Contract. Nothing in this
Agreement or in the Plan will confer upon you any right to continue in the
employ or service of the Company for any period of time or interfere with or
otherwise restrict in any way the rights of the Company (or any subsidiary
of
the Company employing or retaining you) or you, which rights are hereby
expressly reserved by each, to terminate your employee or consultant status
as
the case may be, at any time for any reason whatsoever, with or without
cause.
13. Notices. Any
notice required to be given or delivered to the Company under the terms of
this
Agreement will be in writing and addressed to the Company in care of its
Secretary at its principal offices. Any notice required to be given or delivered
to you will be in writing and addressed to you at the address indicated below
your signature line herein. All notices will be deemed to be given or delivered
upon personal delivery or upon deposit in the U.S. mail, postage prepaid and
properly addressed to the party to be notified.
14. Construction. This
Agreement and the option evidenced hereby are made and granted pursuant to
the
Plan and are in all respects limited by and subject to the express terms and
provisions of the Plan. Any dispute regarding the interpretation of this
Agreement will be submitted to the Plan Administrator for resolution. The
decision of the Plan Administrator will be final, binding and conclusive.
Questions regarding this option or the Plan should be referred to the Legal
Department of the Company.
15. Governing
Law. The interpretation, performance, and enforcement of
this Agreement will be governed by the laws of the State of
California.
16. Additional
Terms Applicable to an Incentive Share Option. In the
event this option is an incentive share option, the following terms and
conditions will apply to the grant:
(a) This
option will cease to qualify for favorable tax treatment as an incentive share
option under the Federal tax laws if (and to the extent) this option is
exercised for Optioned Shares: (i) more than three months after the
date you cease to be an employee for any reason other than death or permanent
disability (as defined in Section 3) or (ii) more than one (1) year after the
date you cease to be an employee by reason of permanent disability.
8
(b) Except
in the event of a Corporate Transaction under Section 5, this option will not
become exercisable in the calendar year in which granted if (and to the extent)
the aggregate fair market value (determined at the Grant Date) of the Company's
Common Shares for which this option would otherwise first become exercisable
in
such calendar year would, when added to the aggregate fair market value
(determined as of the respective date or dates of grant) of the Company's Common
Shares for which this option or one or more other post-1986 incentive share
options granted to you prior to the Grant Date (whether under the Plan or any
other option plan of the Company or any parent or subsidiary) first become
exercisable during the same calendar year, exceed One Hundred Thousand Dollars
($100,000) in the aggregate. To the extent the exercisability of this option
is
deferred by reason of the foregoing limitation, the deferred portion will first
become exercisable in the first calendar year or years thereafter in which
the
One Hundred Thousand Dollar ($100,000) limitation of this Section 16(b) would
not be contravened.
(c) Should
the exercisability of this option be accelerated upon a Corporate Transaction
in
accordance with Section 5, then this option will qualify for favorable tax
treatment as an incentive share option under the Federal tax laws only to the
extent the aggregate fair market value (determined at the Grant Date) of the
Company's Common Shares for which this option first becomes exercisable in
the
calendar year in which the Corporate Transaction occurs does not, when added
to
the aggregate fair market value (determined as of the respective date or dates
of grant) of the Company's Common Shares for which this option or one or more
other post-1986 incentive share options granted to you prior to Grant Date
(whether under the Plan or any other option plan of the Company or any parent
or
subsidiary) first become exercisable during the same calendar year, exceed
One
Hundred Thousand Dollars ($100,000) in the aggregate.
(d) To
the extent that this option fails to qualify as an incentive share option under
the Federal tax laws, you will recognize compensation income in connection
with
the acquisition of one or more Optioned Shares hereunder, and you must make
appropriate arrangements for the satisfaction of all Federal, State or local
income tax withholding requirements and Federal social security employee tax
requirements applicable to such compensation
income.
17. Tax
Arrangements. You hereby agree to make
appropriate arrangements with the Company or subsidiary thereof by which you
are
employed or retained for the satisfaction of all Federal, State or local income
tax withholding requirements and Federal social security employee tax
requirements applicable to the exercise of this option.
9
XOMA
LTD.
By:
▇▇▇▇▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
Vice
President , General Counsel
and
Secretary
Dated:
I
hereby
agree to be bound by the terms and conditions of this Agreement and the
Plan.
By:
▇▇▇▇▇▇
▇.
▇▇▇▇▇
▇▇▇▇▇
▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇,
▇▇ ▇▇▇▇▇
Dated:
If
the
optionee resides in California or another community property jurisdiction,
I, as
the optionee's spouse, also agree to be bound by the terms and conditions of
this Agreement and the Plan.
By:
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇
▇▇▇▇▇
▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇
▇▇▇,
▇▇ ▇▇▇▇▇
Dated:
10